It can be difficult for business owners to stay on top of their finances, especially when it comes to large investments like financing an asset. To help you out with this challenge, this blog post is full of essential asset finance tips every business owner should know. Find out here how you can get the best financing terms for your asset, make sure you get the most out of your investment, and more!
What is Asset Based Finance?
As the name suggests, asset finance is a type of financing that is used to purchase assets. These can be anything from machinery and vehicles to office equipment and property. The key difference between asset finance and other types of financing is that the asset being purchased is used as collateral for the loan. This means that if you default on the loan, the lender can repossess the asset.
Asset finance can be a great option for businesses that want to grow or expand their operations, but don’t have the up-front cash to do so. It can also be a good way to free up working capital that would otherwise be tied up in assets.
Benefits of Asset Based Finance
Asset finance can be a great way for business owners to get the equipment and machinery they need without having to tie up all of their capital in one purchase. By taking out an asset finance loan, business owners can spread the cost of the purchase over a period of time, making it more affordable and allowing them to free up cash flow for other areas of their business.
There are many different types of asset finance available, so it’s important to speak to a financial advisor to find out which option would be best for your business. Here are some of the key benefits of asset finance:
- Flexible repayment terms – Asset finance loans can be tailored to suit your cash flow and budget, with repayment terms that range from 1-5 years. This means you can choose a repayment schedule that works best for your business.
- Competitive interest rates – Asset finance can often be sourced at competitive interest rates, making it an affordable way to finance your equipment purchases.
- Tax benefits – In some cases, the interest on asset finance loans may be tax deductible. Talk to your accountant or financial advisor to see if this applies in your situation.
- Preserve capital – By using asset finance instead of dipping into your business’s cash reserves, you can preserve working capital for other purposes such as stock purchases or marketing campaigns.
- Quick and easy process – Once you’ve been approved for asset finance, the process is usually much quicker than a traditional bank loan. This makes it ideal for urgent equipment purchases or upgrades.
Key Terms in Asset-Based Finance
Asset finance is a term used to describe the process of funding the purchase of assets using finance. There are a number of different types of asset finance available, each with their own advantages and disadvantages. The type of asset finance you choose will depend on a number of factors, including the type of asset you are looking to purchase, the amount of money you need to borrow and your personal financial situation.
Here are some key terms you need to know when considering asset finance:
Asset: An asset is anything that has value and can be used to generate income. For businesses, common assets include property, vehicles, machinery and equipment.
Financing: Financing refers to the process of borrowing money to fund the purchase of an asset. There are a number of different financing options available, including loans, leases and hire purchase agreements.
Loan: A loan is a type of finance where you borrow a lump sum of money from a lender and then repay this over an agreed period of time, usually with interest. Loans can be secured or unsecured depending on the collateral you offer against the loan.
Lease: A lease is a type of agreement whereby you agree to pay a fixed sum of money for the use of an asset over a set period of time. At the end of the lease agreement, you will have no ownership of the asset but may have the option to buy it outright or extend the lease for a further period of time.
Tips for Choosing the Right Asset Finance Company
There are a number of factors to consider when choosing an asset finance provider, and it is important to find one that is best suited to your specific needs. Here are some tips to help you choose the right provider:
1) Determine what type of asset finance you need. There are many different types of asset finance products available, so it is important to first identify which kind of product you need before beginning your search.
2) Consider the size and scope of your business. Not all asset finance providers cater to businesses of all sizes, so it is important to find one that offers products that are suitable for your business.
3) Compare interest rates and fees. When considering an asset finance provider, be sure to compare the interest rates and fees charged by different providers in order to get the best deal.
4) Read the terms and conditions carefully. Once you have found a potential asset finance provider, be sure to read through the terms and conditions of their products carefully in order to ensure that you understand everything involved.
5) Make sure you are comfortable with the provider. Before entering into any agreement with an asset finance provider, make sure that you feel comfortable dealing with them and that you trust them to provide the service they have promised.
Case Studies from Other Businesses
When it comes to asset finance, every business owner should know the basics. However, there are also some more advanced tips that can be extremely helpful. To get a better understanding of how asset finance can benefit your business, let’s take a look at some case studies from other businesses.
Our client is a manufacturing company that makes parts for the automotive industry. They have been in business for over 20 years and have always financed their assets through traditional bank loans. Recently, they decided to explore other financing options and turned to our asset-based lender.
They were able to get a much better deal on their financing and saved money on interest payments. In addition, the flexibility of the asset-based loan allowed them to free up cash flow which they used to invest in new hires. As a result of this move, they were able to increase their production capacity and profits.